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Facts
The assessee, a company engaged in construction, filed a return for AY 2017-18 declaring a loss. The AO made an addition under Section 43CA, considering the stamp duty value of flats to be higher than the agreement value, thereby reducing the work-in-progress. The CIT(A) dismissed the assessee's appeal for non-prosecution.
Held
The Tribunal condoned the delay in filing the appeal before it. Considering the facts and in the interest of natural justice, the Tribunal remitted the appeal back to the CIT(A) for fresh adjudication on merits.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal ex-parte without considering the merits and whether a fresh opportunity for adjudication should be granted.
Sections Cited
250, 43CA, 147, 148, 143(3)
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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI AMIT SHUKLA, JM &
(Assessment Year: 2017-18) Richa India Infra Development Pvt. DCIT, Circle-8(1)(1), Ltd., Room No. 634, Aayakar Bhavan, 1st Floor, Parel ST Depot, Sayani Road, M.K. Road, Mumbai-400020. Vs. Opp. Motilal Oswal Tower, Mumbai-400025. PAN: AAFCR0764A Appellant) : Respondent) Appellant /Assessee by : Shri Kumar Kale, Advocate Revenue / Respondent by : Shri Annavaran Kosuri, Sr. DR : 03.07.2025 Date of Hearing : 18.07.2025 Date of Pronouncement O R D E R Per Padmavathy S, AM:
This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals), Gwalior [In short 'CIT(A)'] passed under section 250 of the Income Tax Act, 1961 (the Act) dated 11.12.2024 for AY 2017-18. The assessee raised the following grounds of appeal:
1. On the facts and in the circumstances of the case, and also in law, the Ld. FAA erred in passing ex-parte order on the grounds of non-prosecution. Your appellant, therefore, prays that the impugned order be set aside and the matter may be restored to the file of the Ld. FAA for de novo adjudication on its merits.
2. On the facts and in the circumstances of the case, and in law, the Ld. FAA ought to have held that the Ld. AO erred in reducing the value of appellant's Work-in-Progress as on 31.03.2017 at Rs. 109,40,57,463/- as against the Rs. 129,61,88,625/- as per appellant's Financial Statements by making an addition of Rs. Rs.20,21,31,162/-as deemed income u/s 43CA of the Act. Your appellant, therefore, prays that the Ld. AO be directed to delete the aforesaid addition of Rs. 20,21,31,162/-.”
2. The assessee is a company engaged in the business of construction of residential and non-residential complexes. The assessee filed the return of income for AY 2017-18 on 31.10.2017 declaring a total loss of Rs. 29,52,032/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. During the assessment proceedings, the Assessing Officer (AO) noticed that the Stamp Duty value of six of the flats in the project sold by the assessee is more than the consideration received. The AO accordingly issued a show-cause notice asking the assessee to explain as to why the value as per Stamp Duty should not be considered as full value of consideration under the provisions of section 43CA of the Act. The AO further held that since the assessee is following percentage completion method for revenue recognition why an addition of Rs. 20,21,31,162 cannot be made by reducing work-in-progress. After considering the various details filed by the assessee the AO made an addition under section 43CA to the tune of Rs. 20,21,31,162/- by holding that “3.11 In view of the above discussion, the amount of Rs.20,21,31,162/- being the differential amount between stamp duty value of Rs.28,32,57,338/- and agreement value of Rs.8,32,57,338/- is made to the business income of the assessee as per section 43CA of the Act. Since the assessee has not recognized the revenue during the year under consideration on the ground that it is following percentage completion method and the project was completed less than 25%, this differential amount is being reduced from the Work-in-progress to get the beneficial interest when the assessee recognizes the profit from the project.
3.12 As per the balance sheet for the year under consideration and the submissions made, the closing Work-in-Progress is Rs.129,61,88,625/- Hence, after considering the deemed income of Rs.20,21,31,162/- u/s.43CA of the Act is discussed supra, the assessed closing Work-in-progress is worked out as follows:
Closing WIP on 31.03.2017 Rs.129,61,88,625/- (as per Balance sheet for A.Y.2017-18) Less: Deemed income u/s.43CA Rs.20,21,31,162/- (As discussed above) Assessed Closing WIP to be carried Rs.109,40,57,463/- forward
Aggrieved assessee filed further appeal before the CIT(A). The CIT(A) after condoning the delay in filing the appeal issued notices to the assessee calling for further details. Since the assessee did not respond, the CIT(A) dismissed the appeal in limine. The assessee is in appeal before the Tribunal against the order of the CIT(A).
We heard the parties and perused the material on record. There is a delay of 7 days in filing the appeal before us and the appeal filed a petition for condonation before us. Having heard both the parties and perused the material on record, we are of the view that there is a reasonable and sufficient cause for the delay in filing the appeal before the Tribunal. Therefore following the Hon’ble Supreme Court decision in the case of Collector, Land Acquisition Vs. MST.Katiji & Ors., (167 ITR 471) (SC) we condone the delay of 7 days in filing the appeal and admit the appeal for adjudication. The ld. AR submitted that the assessee was not aware of the notices issued by the CIT(A) due to employee turnover and accordingly prayed for a one more opportunity to represent the case on merits. Considering the facts peculiar to the assessee and in the interest of natural justice and fair play, we are inclined to Richa India Infra Development Pvt. Ltd. give one more opportunity to the assessee. Accordingly, we remit the appeal back to the CIT(A) to consider the case on merits by calling for necessary details as may be required and decide in accordance with law. The assessee is directed to provide the details as may be called for by the CIT(A) and co-operate with the appellate proceedings. It is ordered accordingly.
In result, the appeal of the assessee is allowed for statistical purposes.